HOST: Well at the end of the year, at the end of the Parliamentary session, it seems that the AWU slush fund affair is inconclusive. The Opposition are still making allegations, even though they've shifted ground somewhat. But you haven't delivered a knockout blow.

Wouldn't a short, sharp inquiry, an independent inquiry, judicial inquiry, end the matter?

PM: Paul, the Opposition will continue carrying on about this matter, not because they've got any proof, but because they don't have positive policies for the future.

Australians are rightly sick of this campaign of sleaze and smear. They don't want to see Mr Abbott fighting me over these sorts of issues. What they want to see is, they want to see the nation's leaders fighting for them and things that matter to them.

So I'm going to get on with fighting for Australians, making sure we keep our economy strong, and fighting for the things that Australian families need now, including a better deal on power prices.

Mr Abbott's made it perfectly clear that he's going to stay wedded to this sleaze and smear, not only now, but even if he was elected Prime Minister. The driving force of his Prime Ministership would be continuing the sleaze and smear.

HOST: I was going to come to that. Yes, that's right. A new promise from Tony Abbott is that if he wins the election, he will have a judicial inquiry into this issue. He says - in fact, he told his party room that Labor and you are trying to bluff the Opposition out of it, that's because you're afraid of it.

PM: Mr Abbott is now going to ask the Australian people in 2013 to vote for him on the basis that the centre of his Prime Ministership would be continuing this personal campaign of sleaze and smear.

He is going to go to the next election in 2013 with no real plan for jobs, nothing on health, nothing on education, nothing on power prices, nothing on national security, and the list goes on.

The driving purpose of his Prime Ministership would be to continue a fight against me, rather than a fight for the Australian people. Well I think Australians are heartily sick of this, Paul; heartily sick of this negative, personality-based politics from Mr Abbott.

We'll let him just carry on with all that sleaze and smear, whilst we get on with the job for Australians. I'm here today, Paul, to talk about my plan to make a difference to power prices for families who are struggling with those big electricity bills.

HOST: And we will talk about that, Prime Minister, but there's a Galaxy Poll this morning in the News Limited papers - it finds 31 per cent believe you've been economical with the truth. Thirty one per cent believe you've lied. Only 21 per cent think you've been completely honest. And the poll says 60 per cent want a full account in the Parliament. Will you deliver a full account in the Parliament?

PM: I don't comment on opinion polls, Paul. I've answered questions about this matter for the best part of 20 years. I've answered them in the Parliament this week and in other weeks. I've answered them publicly. I've told the truth about this matter, and I didn't do anything wrong.

I am not going to become bogged down in Mr Abbott's campaign of sleaze and smear. The fact that he's got no positive plans for the nation's future is his problem and a matter for him.

I am not going to be diverted from delivering my positive plans for Australian families, and, really, Paul, at the end of the week that was, where Mr Abbott didn't ask a question about jobs, didn't ask a question about health, didn't ask a question about education, didn't ask a question about childcare, or power prices, let's get on with the job.

HOST: Prime Minister, it's a very big allegation for the Opposition to make, that you misled the WA Corporate Affairs Commissioner.

Now union sources tell me - union people I've spoken to - is that it's very unusual for the name of the union to be put on these associations or accounts that are used and, as you've told press conferences, every union does it, but it's unusual to put the union's name in the name of the association, and that's where the misleading comes into it.

PM: Paul, this is all sleaze and smear from Mr Abbott and his team, because they haven't got anything positive to say. I did not do anything wrong. The Opposition spent the week in overreach and then humiliating backdown.

One moment, apparently, I'm guilty of a crime, the next moment it slipped right back down to ‘conduct unbecoming'. What that is telling you is that the Opposition doesn't really have anything to say here of substance. It just wants the sleaze and smear to keep going. And, indeed, Liberal strategists have been talking to people in the media saying ‘no, we don't have any evidence of any wrongdoing, we just want to keep this going because it fits our political strategy'.

Well let's name their political strategy. Their political strategy is one of negativity, because they do not have any positive plans for the nation's future, and Mr Abbott will never have any positive plans for the nation's future. That's why the nation's been treated to the spectacle that it has this week.

HOST: Prime Minister, you've spoken about electricity reform. I wonder when the last time was that that you spoke privately to the New South Wales and Queensland Premiers, and I wonder if it's possible to introduce this $250 saving for consumers if they don't sell a lot of their electricity assets?

PM: This isn't about the ownership of electricity assets; it's about the way in which our power system works. I will have the Council of Australian Governments meeting at the end of this week, and I will be taking there a plan to make a difference; a plan to make sure that families pay $250 less per year for electricity than they would if we just let the current system run.

And it's about addressing the real drivers of high power prices - the overinvestment, the so-called gold-plating of the network, the fact that consumers don't get enough of a say, empowering the regulator at the centre of this with more resources, and making sure too that we reward big electricity users, big businesses, that moderate their consumption during peak time periods of pressure on the electricity network.

We can make a difference; the Productivity Commission said this all adds up to difference of around $250 a year for a family. I'm determined to make the difference.

HOST: To clarify, is that without a sell-off? Can you get the $250 saving without a sell-off of assets in New South Wales and Queensland?

PM: Absolutely you can. This is not about the ownership of electricity assets, it's about the market design features that I've talked about, and giving consumers more of a go, more of a say, more information about their own power usage.

HOST: Prime Minister, good morning, firstly. Now how can consumers understand gold-plating enough to actually challenge it, and haven't we gone down this road before with grocery watch and fuel watch and all of those schemes?

PM: I think people can understand gold-plating really easily. What it means is there's an overinvestment in the poles and wires, and under the current market design - the rules for electricity - there's actually a perverse incentive for companies to keep investing, keep investing, keep investing - and passing all of those costs on to consumers. Indeed, there's been around about $11 billion of investment for the peak loads on four days a year.

Well we can do better than that. We can do better with a regulator that has more resources available. We can do better with consumers at the centre of the decision-making process. We can do better with consumers getting more information in their own homes about how to manage their electricity consumption.

HOST: Is it different to those schemes that failed? Is it different to the grocery and fuel watch schemes, or is it essentially the same model?

PM: What we are talking about is a detailed plan to change many features of the way the electricity market runs, and it is not an appropriate comparison to saying this is about a website with more information.

This is about changing, going through from the top - at the moment, a perverse incentive to gold-plate, more investment in poles and wires - changing that so these things are set more independently.

Number two: putting consumers at the centre of the decision-making process through a consumer challenge panel, giving mums and dads in their own home more information about their electricity usage so they can make choices, knowing what it's going to cost them.

Number four: actually getting through to the regulator more resources to help them go about their job.

And finally, rewards to big businesses that use a lot of power to lighten the load on peak days. That's the plan that adds up to a $250 difference. That's the plan I'll be fighting for at the Council of Australian Governments meeting.

HOST: Okay, switching to another issue. The Israel lobby and the Opposition are very unhappy you were rolled on Australia's vote in the UN, giving the Palestinian authority observer status. Here is Tony Abbott this morning:

TONY ABBOTT GRAB: It seemed to put in jeopardy 60-odd years of settled bipartisan policy of rock-solid support for Israel.

HOST: Prime Minister, you said over the weekend that your Cabinet's position on Israel will create further problems in terms of the peace process. How can the Prime Minister's position be at odds with her Cabinet and party's position on such a crucial foreign policy area?

PM: I did not say that over the weekend, Patricia, number one. And number two, there is a Government position here, which is my position, which has already been put into operation. We abstained on-

HOST: Do you fully support the Government's position on abstaining?

PM: I announced at our party room meeting that we would be abstaining, and we did abstain, we abstained on the vote.

HOST: Will you feel completely comfortable with that position? You think that position is-

I announced at our party room meeting we would be abstaining on the vote before the UN, and that vote is to give the Palestinian people the same status at the UN as the Vatican has now. We abstained, the vote was always going to be carried, and it was carried by a substantial majority.

Coming back more broadly to questions of peace in the Middle East, there is no peace plan on the table at the moment for people to vote for. What I would love to see, what my party would love to see, what I think so many in the Australian nation would love to see is a peace plan that resolves the ongoing conflict in the Middle East. Unfortunately there's no such peace plan in the offing right now, which is why, of course, we will always say that we want to see peace in the Middle East, we want a two-state solution, we want to see both Israel and Palestine with states, with secure borders and peace for the future.

HOST: More than 30,000 boat people have arrived since Labor came to power, and 1,000 have drowned. The Opposition blames the Government, and on Thursday tried to bring back Temporary Protection Visas.

SCOTT MORRISON GRAB: To deny people smugglers a product to sell before the Parliament rises, and the onset of the monsoon season, which is the most dangerous period of the year for people to travel on boats to Australia.

HOST: Prime Minister, November was the latest record month for boat arrivals, none of your policies have worked at stopping the boats, stopping the arrivals. Is it time to consider Temporary Protection Visas and turning back the boats, considering they're the only policies you haven't yet tried, and the ones that you have tried have failed?

PM: Temporary Protection Visas didn't work when they were part of our nation's policy last time. They were implemented by the Howard Government and we continued to see people arrive in very large numbers. And on turning back the boats, we've got the clearest possible advice from people of the authority, of Angus Houston, that that is not a policy that can work in current circumstances, and we've got advice from our Defence Force leadership that it would put ADF personnel at risk.

We have put in place and are continuing to put in place the recommendations of the Houston panel, the former chief of the Defence Force's advice about this matter.

Every step of the way, of course, we continue to encounter negativity from the Opposition, always negativity, and no preparedness to work with us on any of these issues. They delayed the creation of offshore processing, for example, by around 12 months.

HOST: Do you think any of it is working, because they keep coming on boats?

PM: Well, we will continue to put in place the policies that Angus Houston has advised us through the panel to do. This is a complicated issue for our nation, for nations around the world.

Anybody who says that there is a simple fix to you is not telling you the truth. It takes a range of policies, and we are putting that range of policies in place.

HOST: Looking forward to next year, many people, including the Opposition of course, but others, doubt you'll deliver either a Budget or a surplus. Do you pledge to deliver both of those next year?

PM: Well we've delivered the Mid-Year Economic and Fiscal Outlook, which shows we're on track to achieve a Budget surplus, and we stand by the forecasts in MYEFO.

We will in the course of next year be delivering a Budget. We will be delivering the funding packages for the National Disability Insurance Scheme, and for school reform, because I, as Prime Minister, want to be there with the Australian nation, building for the future.

There's nothing more important to the economic and social future of our country than getting kids a great education, and I don't want families to be broken because someone has a disability. I want them to be supported.

HOST: Prime Minister, I want to take you to the Newstart allowance. The Senate reported this week, Labor Senators broke ranks with the Coalition, and called for a rise in the single rate of the Newstart allowance. Bill Shorten, your own Minister, has said that it's inadequate, and he's worried about it.

Will you put this on the table, and is it something you will consider in the Budget process?

PM: I can understand community concern here, I can understand concern amongst my colleagues, indeed, to a person, where in my Cabinet, in my Ministry, in my caucus, people are concerned about jobs, about making sure people get the benefit of work, about how hard it is to be unemployed, how alienating that is.

The best thing that we can do for Newstart recipients is keep the economy strong and resilient and offering people the benefit of work. And that will be our focus - making sure that jobs are being created, and we are providing people with employment services and support to get those job opportunities.

HOST: But do you look at ruling out that payment specifically?

PM: We always work through Budget decisions very carefully. We've got a set of difficult choices in front of us, because we're very prudent about Government funds.

I do understand concern about the rate of Newstart, but across the Budget we've got some difficult decisions to be taken to fund great Labor priorities like making sure every kid gets an excellent education, and that people with disability don't get cast to the margin of our nation's life.

HOST: Prime Minister, just very briefly, because we're nearly out of time. Aren't you going to stand politics on its head if you want to get to a surplus with a slash-and-burn Budget just before an election?

PM: What we do, Paul, is we approach every Budget decision in a Labor way, and when we make them, they're done with Labor values. That's why we've done things like means test the private health insurance rebate, and got rid of a poorly targeted dental scheme. We take savings in a Labor way to fund Labor priorities, better dental care for Australians, better healthcare for Australians. And now we'll get on with even more money into schooling for our kids, and more support for people with disabilities.

HOST: Okay, Prime Minister Julia Gillard, thank you very much for being with us today.